London: Paris-based think tank OECD on Monday said India’s economic growth is likely to remain “subdued” in the near term, and further policy tightening is warranted to tame inflation.
“Growth has moderated and, against the backdrop of a weakening global economy, (it) is projected to remain relatively subdued and reliant on private consumption in the near term,” OECD said about India in its latest Economic Outlook report.
The Organisation for Economic Cooperation and Development (OECD) is a 34-member grouping of mostly advanced economies.
As per OECD’s latest projections, India would see a growth of 7.7% in 2011, lower than 9.9% expansion witnessed last year.
“In India, the annual rate of inflation remains high and is becoming more widespread. Further policy tightening is warranted to help contain demand pressures and reduce the risk of inflation expectations becoming destabilised,” OECD said.
Pointing out that inflation continues to remain above the Reserve Bank of India’s comfort level, the report said that price pressures are likely to recede only gradually in response to easing demand and a stabilisation of commodity prices.
Headline inflation has been above the 9%-mark since December, 2010. It stood at 9.73% in October this year.
The RBI has hiked interest rates 13 times since March, 2010, to tame demand and curb inflation.
“An improvement in external conditions and some strengthening in business investment should lead to a pick-up in growth in the second half of 2012,” OECD said.